Key Takeaways
- The new ACAS 2026 guidance on settlement agreements introduces a mandatory 10-day minimum consideration period for employees offered redundancy or dismissal.
- Settlement agreements are only legally binding if you receive independent legal advice from a solicitor; your employer must pay for this, so our solicitor’s service is usually free.
- Employees now have more protections against undue pressure during negotiations under Employment Rights Act 2025 changes.
- You can refuse or negotiate your settlement agreement terms—our solicitors can help you improve your financial package.
- Signing without advice may waive valuable claims such as unfair dismissal, redundancy pay, or discrimination rights.
- Our solicitors offer rapid, same-day independent legal advice and deliver your ILA certificate electronically UK-wide.
- Our team is rated Excellent, with over 1,400 five-star reviews on Trustpilot, Google, and more.
New ACAS 2026 guidance on settlement agreements: What changes for employees facing redundancy or dismissal this summer?
If you are facing redundancy or dismissal this summer and have been handed a settlement agreement, understanding the new ACAS 2026 guidance is essential. The most significant update is a mandatory 10-day minimum consideration period. Employers must give you this time to review any settlement agreement and receive independent legal advice—now a requirement for the agreement to be binding. Your employer must cover the legal fees, so our solicitor’s service is usually free to you.
These changes mean greater protection for employees: you cannot be rushed into agreeing or unfairly pressured to sign away your rights. Our solicitors provide clear, practical advice, help negotiate improved deals, and ensure you understand your rights and options. We aim to secure a fair financial settlement while protecting you from improper behaviour or undue influence during the process.
To discuss your settlement agreement, call us on 0800 054 1144 or book your settlement agreement advice online for rapid, confidential help.
What has changed under the new ACAS 2026 settlement agreement rules for redundancy and dismissal?
The ACAS 2026 guidance introduces several major updates for settlement agreements during redundancy and dismissal:
- A compulsory minimum 10-day consideration period applies to all employees—regardless of employer deadlines.
- Clearer rules prohibit employers from applying undue pressure or engaging in improper behaviour during negotiations, requiring a transparent, documented process.
- Updated model documents compel employers to set out, in writing, statutory entitlements (redundancy pay, notice, holiday) and any extra sum for waiving legal claims.
For employees, this means you have guaranteed time to get advice and must be given full details of every payment and right you are giving up. These new rules support fairness and informed choices.
Always request the draft settlement agreement and payment breakdown in writing. This protects your 10-day consideration period and ensures you can review all details with your solicitor before making any decisions.
To dive deeper into practical guidance and the legal process, see our Settlement Agreement Advice or visit our redundancy advice page.
What is a settlement agreement? (2026 update for employees facing redundancy or dismissal)
A settlement agreement is a legally binding contract between you and your employer that ends your employment and resolves potential legal claims. In the redundancy or dismissal context, you agree to give up rights—such as bringing an unfair dismissal or discrimination claim—in return for agreed compensation and other terms. For it to be valid, you must receive independent legal advice (ILA) from a qualified adviser.
Employers should now, as standard, distinguish between statutory entitlements and additional settlement sums using a clear payment table. All terms—including references, confidentiality, and restrictive covenants—can be negotiated.
Settlement agreements are voluntary. If you sign, you permanently give up the claims listed, so understanding the consequences is vital.
A shop assistant receives a settlement agreement after being selected for redundancy. The offer lays out £6,500 statutory redundancy, £2,000 ex gratia (to settle any potential discrimination claim), and four weeks’ notice pay. Each element is set out in a table, in line with 2026 requirements.
For further detail, review our guidance on redundancy and discrimination settlement agreements.
When and why are settlement agreements used in redundancy and dismissal cases in 2026?
Employers use settlement agreements to manage risk and reach an agreed exit with employees. In 2026, their use is routine in redundancy situations (both voluntary and compulsory), performance-related exits, and when dismissals carry potential legal risk.
Common scenarios include:
- Voluntary redundancy designations with offers above statutory minimums
- Disputed or potentially unfair redundancies or dismissals
- Closing down risks of discrimination, whistleblowing, or other employment claims
Employees benefit from the certainty of guaranteed payments, control over references, and the avoidance of lengthy tribunal proceedings. With the 2026 changes, settlement agreements must transparently identify whether you are being offered only statutory terms or something more.
Always confirm whether your situation is a genuine redundancy or if there may be grounds for an unfair dismissal or constructive dismissal claim—this can affect the value of your agreement.
Use the Settlement Agreement Calculator to evaluate your offer’s fairness.
Is independent legal advice now mandatory for all settlement agreements? (How s.203 Employment Rights Act 1996 applies in 2026)
Yes—independent legal advice remains a statutory requirement for a settlement agreement to be legally binding under section 203 of the Employment Rights Act 1996. This safeguard ensures you understand the agreement and the rights you are waiving.
Our solicitors explain all terms, review payments and their tax treatment, clarify references, and ensure any restrictive covenants are fair. After we advise you, we provide the ILA certificate—the document your employer needs to finalise the settlement. The advice and certificate stage are always paid for by your employer.
If you skip this step, the agreement is not enforceable, meaning your employer cannot rely on you having waived your rights.
A care assistant receives a settlement offer but is unsure what claims she is waiving. She books a remote appointment with us, and after a clear explanation, our solicitor sends her ILA certificate directly—no cost to her, all paid by her employer.
Need urgent, remote advice? Book your ILA appointment online or call 0800 054 1144—our employer-funded service is always free for employees.
How does the new 10-day consideration period under ACAS 2026 affect employees?
Since April 2026, all settlement agreement offers for redundancy or dismissal must allow at least 10 calendar days for you to review, consider, and seek legal advice. This period begins once you receive the written draft—not just when discussions start.
Employers cannot lawfully pressure you to sign early or threaten to revoke the offer within this window. The rule gives you protected time to calculate payments (using our Redundancy Calculator), check for all potential claims, and get proper legal advice. If you need extra time due to health or language issues, employers are advised to be flexible.
Do not feel pressured—demand the draft agreement in writing and note the receipt date. Your 10-day period is your right.
To secure expert, employer-funded advice on your settlement agreement, call 0800 054 1144 or book your settlement agreement advice online.
What protections do employees have during pre-termination negotiations and protected conversations? (Employment Rights Act 2025 changes)
With the Employment Rights Act 2025 and updated ACAS guidance, employees benefit from clear protections during off-the-record settlement discussions. Employers must avoid all improper behaviour—such as putting you under pressure to sign, misrepresenting your entitlements, or trying to bypass the 10-day consideration rule.
Protected conversations under section 111A of the Employment Rights Act 1996 cannot be used as evidence in unfair dismissal claims unless there is improper conduct—like threats or misleading statements. If you experience this, you can still challenge the fairness of your exit or your settlement agreement.
You retain all other rights—against discrimination (via the Equality Act 2010), harassment, or whistleblowing detriment—regardless of any protected conversation.
An office worker is told to sign a settlement agreement within two days, before fully considering her options. She challenges this as improper behaviour; the agreement is set aside, and she receives proper advice within the 10-day minimum.
For more, view the ACAS guidance on settlement agreements and our harassment and discrimination advice.
Can I negotiate a better financial package in my redundancy or dismissal settlement agreement in 2026?
Absolutely—you have the right to negotiate every aspect of the agreement, not just the headline payment. The new guidance encourages negotiation, especially if you have potential unfair dismissal, redundancy, or discrimination claims.
You can request:
- Additional ex gratia compensation above redundancy pay
- Enhanced notice payments or more favourable terms
- A factual or agreed reference
- Changes (or removals) to restrictive covenants
Document any grievances or errors in your redundancy calculation and support your request using our Employment Tribunal Compensation Estimator.
Never accept the first offer without reviewing it with our solicitors. Negotiation can often significantly increase your financial outcome.
Is my 2026 settlement agreement payment tax free? (Redundancy and dismissal tax rules explained)
Usually, the first £30,000 of genuine compensation for loss of employment—including redundancy payments and most ex gratia sums—is tax free under current law. Payments for notice (PENP), accrued holiday pay, salary, or bonuses are taxable as income and must be taxed at source. It is important your agreement lists each payment and tax treatment separately, in line with HMRC and ACAS 2026 expectations.
Employers and employees must agree on payment structure, as hidden or mislabelled payments can lead to tax liabilities. HMRC scrutiny of these settlements is strict—be sure to get advice.
A project manager receives £20,000 statutory redundancy, £5,000 ex gratia, and a £7,500 PENP. Only the redundancy and ex gratia total (£25,000) is tax free; all other amounts should be subject to PAYE.
See gov.uk: Tax on termination payments for further details.
What key clauses and risks should I look for in a settlement agreement? (Restrictive covenants, confidentiality, references, and more)
Settlement agreements usually include:
- Restrictive covenants: Limits on working for competitors or contacting clients—make sure it is not overly broad or unfair, and clarify if varied or waived.
- Confidentiality clauses: These often limit what you can discuss about your exit, but the new guidance promotes explicit carve-outs for whistleblowing or crime reporting.
- References: Insist on agreed wording to avoid uncertainty for future employers.
- Tax indemnities: Check if you may be liable to repay some payments if HMRC reclassifies sums.
- Claims waiver: Ensure all claims waived are listed and that you understand the effect.
Go through each clause with your solicitor and only sign when clear. Unchecked clauses could limit future employment opportunities or expose you to risk.
Do not ignore “standard” clauses—restrictive covenants or confidentiality terms may require negotiation to protect your future career.
Our detailed guidance on Performance, Capability & Disciplinary Exits and funding settlement agreements covers these clauses in more depth.
If you want an expert review and to ensure your financial package is fair, call 0800 054 1144 or book your free settlement agreement review. Our advice is always funded by your employer.
How do I sign my settlement agreement in 2026? (Step-by-step process for remote, same-day ILA)
In 2026, almost all settlement agreements are signed and certified remotely:
- Your employer sends the draft agreement and payment details.
- You contact our solicitors for a same-day appointment by video, phone, or secure portal.
- Our solicitor reviews your document, explains every clause, and clarifies payments, tax, and waivers.
- When ready, we provide your ILA certificate via secure digital signature.
- After your 10-day consideration period, you sign and return the agreement—usually by secure digital means.
- Your employer releases agreed payments.
Employers should avoid short “return by” deadlines and accommodate remote signing to facilitate the process.
A marketing manager books a remote video meeting, receives expert advice from our solicitor, and signs her agreement from home using secure digital signature. All payments are made within days, and she is free to start her next role.
See our client success stories to read how we have helped other employees with remote settlement advice.
Why Choose Settlement Agreement Lawyers?
If you’re facing redundancy or dismissal this summer, our solicitors combine unrivalled expertise with fast, friendly service. We act only for employees, never for employers, and all our advice is both confidential and funded by your employer. Our team is SRA-regulated, offers same-day remote appointments, and ensures every aspect of your settlement is checked thoroughly for fairness, tax, and legality.
Check your adviser’s independence and employee-only experience. Our solicitors are specialists in employee agreements and will always put your interests first.
See our client stories for case studies and testimonials.
Frequently Asked Questions About the New ACAS 2026 Guidance on Settlement Agreements
What has changed in settlement agreements for employees in 2026?
The main changes are the introduction of the 10-day minimum consideration period and stricter employer obligations to avoid undue pressure. There are also clearer rules for breaking down payments and outlining employee rights before signing.
How does the ACAS 2026 10-day rule work for redundancy or dismissal?
The rule requires that you receive at least 10 calendar days to consider and get legal advice on any settlement agreement for redundancy or dismissal, starting from the date you get the written agreement—not when conversations begin.
Do I have to sign a settlement agreement for redundancy or dismissal?
No, settlement agreements are completely voluntary. You cannot be forced to sign, and you should refuse if you are unhappy with the terms or want to explore legal claims against your employer.
Can I negotiate or refuse a settlement agreement in 2026?
Yes, you can negotiate all terms—or simply refuse to sign. The ACAS 2026 guidance encourages meaningful negotiation and protects you from employer pressure or negative consequences for saying no.
What counts as improper behaviour or undue pressure by an employer now?
Improper behaviour includes forcing or rushing you to sign, making threats, withholding written documentation, or giving misleading information about your rights. Such conduct can invalidate a settlement agreement and give rise to workplace claims.
Are my settlement agreement payments tax-free in 2026?
Most redundancy and ex gratia compensation up to £30,000 is tax free, while notice pay, salary, or bonuses are taxable as normal income. The agreement should list each payment separately, and your solicitor can advise on the tax breakdown.
Will my employer pay for my legal advice on a settlement agreement?
Yes, your employer is legally obliged to pay your reasonable legal fees for independent advice, making our service free for you.
What happens if I refuse to sign a settlement agreement in 2026?
You retain all your statutory rights. You may claim redundancy or notice pay and can pursue an employment tribunal claim if you believe you have been unfairly treated. Refusing a settlement agreement should not lead to adverse treatment by your employer.
Book Your Free Settlement Agreement Review Under the New ACAS 2026 Rules
With the new ACAS 2026 guidance in force, employees have valuable new protections and more time to assess settlement agreements following redundancy or dismissal. Our solicitors offer rapid, SRA-regulated independent legal advice at no cost to you—your employer always pays. For immediate expert help with your settlement agreement, call 0800 054 1144 or book your settlement agreement advice online for a confidential, same-day remote appointment.
